The unintended consequences of the coronavirus pandemic are being played out in homes and apartments throughout the world. More and more employees are working from home, that’s if they have a job to go to. Entire industries are effectively shut down as the world attempts to slow the spread of the virus.
At some point, however, things will return to normal. But it will be a new normal. There are many businesses that won’t reopen, and many industries that will forever be changed. As an investor, now is the time to get out your crystal ball. Timing the market is a fool’s errand. But looking at what industries are positioned to thrive in a world that will be changed by the coronavirus is a prudent strategy.
We’ve identified 8 companies that are adapting to what the economy will be like in a post-coronavirus world. It will undoubtedly be more digital than it already is. Supply chains may become more vertically integrated as “Made in America” may take on a whole new meaning. As will the idea of working from home, going to a concert, or even preparing a meal.
Quick Links
- Amazon
- Alphabet
- Blue Apron
- Peloton
- Zoom
- Ulta Beauty
- Teladoc Health
- DocuSign
#1 - Amazon (NASDAQ:AMZN)
Let’s just get this stock out of the way for starters. Amazon (NASDAQ:AMZN) has been changing the way the world shops for years. There’s no reason to believe it won’t continue to be a significant player in the post-coronavirus world. Amazon is finding that even its considerable e-commerce muscle is being challenged by the demand of a nation that is staying home.
However, the company is ramping up hiring and there’s little doubt that the tech giant will find the right balance of supply and demand. But the story of Amazon goes beyond e-commerce. The company has been laying the groundwork to become one of the leading players in cloud computing. And its Amazon Web Services unit already accounts for a significant amount of the company’s revenues.
Amazon is becoming a more mature company, but they continually find ways to reinvent themselves to stay relevant. It’s a company that was built for a world in which we all look to have products and entertainment delivered to us.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $202.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 41 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $235.77 (16.2% Upside)
#2 - Alphabet (NASDAQ:GOOGL)
Another one of the “big tech” companies that continue to display an ability to adapt to changing markets is Alphabet (NASDAQ:GOOGL), the parent company for Google. And Google is the parent of YouTube, which is where I want to focus. YouTube has already benefited from being in the Google portfolio. The digital channel, which was once the domain of low production “How To” videos, is now the world’s largest video platform and reaches over 1 billion users per month. It’s also the world’s second largest search engine.
Mostly due to its relationship with Google, YouTube has shown itself to be amazingly adaptive. And I anticipate more of the same as businesses go back to anything but usual. Conventions are being cancelled or postponed. Putting aside the increased emphasis on the health of its employees, many companies may be pleasantly surprised at the cost savings gained from digital conferencing.
With that said, while there’s no doubt that on-site conventions won’t disappear completely, it’s not hard to imagine that some conventions will go entirely digital. In this current environment, companies are trying to simulate an in-person experience through a mix of webinars, teleconferences, Slack channels, Twitter chats, etc. And that’s an opportunity for a platform like YouTube to capture additional market share.
About Alphabet
Alphabet Inc offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Read More - Current Price
- $175.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 35 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $205.90 (17.0% Upside)
#3 - Blue Apron (NYSE:APRN)
If a company ever needed a lifeline, it was Blue Apron (NYSE:APRN). The company was struggling to get its value proposition across to investors, and consumers. The manufacturer of pre-packaged meal kits was finding its price too high to stimulate demand.
But then, we all got told to shelter in place. And all of a sudden, for those who found their paychecks uninterrupted, having a couple of nights a week where you don’t have to think about what’s for dinner didn’t seem so bad.
In the three trading days between March 16 and March 18, APRN stock surged over 700%. It has since given back some of those gains. Some of that is due to skepticism that the current crisis will be a game-changer for the company. But behavioral dynamics are what they are. Blue Apron’s recent strategy has been to cater to the customers that liked their service and were loyal to it.
Now they have a chance to “prove themselves” to a new group of customers. The company is being guarded about its future prospects. But there’s no question that Blue Apron deserves watching. This is good publicity for the brand. And more importantly, it’s publicity the company doesn’t have to pay for.
About Blue Apron
Blue Apron Holdings, Inc operates a direct-to-consumer platform that delivers original recipes with fresh and seasonal ingredients. The company also operates Blue Apron Market, an e-commerce market that provides cooking tools, utensils, pantry items, and other products. In addition, it offers Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines, which can be paired with its meals.
Read More - Current Price
- $12.99
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Peloton (NASDAQ:PTON)
The Peloton (NASDAQ:PTON) commercial isn’t looking so off-brand these days is it? It seems like a lifetime ago, but late last year, Peloton created quite the stir with an ad that came across to many consumers as anything but the empowering message the brand intended. However, with gyms closing all around America, consumers are looking for ways to keep their fitness regimen going. And Peloton is there to be the hero.
According to Evercore ISI analyst Lee Horowitz via MarketWatch, March downloads of the Peloton app have increased five times compared to February. This was based on a review of third-party app data from Sensor Tower. Wrote Horowitz, “We are seeing Peloton subscriber growth and engagement clearly benefiting from global quarantines.”
PTON stock climbed nearly 10% in the week of trading that ended March 27. The stock is still down for the year. However, like many stocks benefiting from the coronavirus, PTON stock’s performance now looks less bad than the broader market.
Of course, like Blue Apron, there’s no guarantee that Peloton will continue to benefit once customers are released back to their local gym. But you have to believe that there will be a certain amount of “stickiness” as users feel part of an online community.
About Peloton Interactive
Peloton Interactive, Inc operates interactive fitness platform in North America and internationally. The company offers connected fitness products with touchscreen that streams live and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names.
Read More - Current Price
- $8.36
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.75 (19.3% Downside)
#5 - Zoom (NASDAQ:ZM)
As a freelance writer, I was using Zoom (NASDAQ:ZM) before it was cool. But has Zoom ever become the big man on campus. Zoom has become one of the most bought stocks in recent weeks and it’s not hard to see why. Businesses across the world are adjusting to a remote workforce.
This is an opportunity for Zoom to make its case to businesses that have been resisting the trend of having employees do some or all of their work remotely. And Kate Lister, president of the consulting firm Global Workplace Analytics, says it’s possible that 25 percent of employees will continue working from home multiple days a week after employees are given the all clear to return to work.
ZM stock has climbed over 100% for the year as of March 27. And according to Needham analyst Richard Valera, Zoom may still have a long runway.
“We think Zoom’s exceptionally easy to use meetings product has both enabled and benefited from a long-term secular shift towards working from home,” says Valera. “We think Covid-19 is driving an enduring application of this shift. In the near-term, our checks confirm significant increases in business activity, especially in Covid hotspots, which admittedly could be mitigated by delays in closing larger enterprise deals.”
About Zoom Video Communications
Zoom Video Communications, Inc provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices.
Read More - Current Price
- $78.86
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 12 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $76.61 (2.9% Downside)
#6 - Ulta Beauty (NASDAQ:ULTA)
Supply chains are likely to change as a result of the coronavirus. Businesses are realizing that a “just in time” inventory strategy is compromised when the company that dominates your supply chain is under quarantine.
Nobody is saying that China will not have a significant role to play in the post-coronavirus economy. However, it’s likely that their role may become a bit more muted as companies look to take more control of where their products come from. And that’s one reason to consider Ulta Beauty (NASDAQ:ULTA). The company’s supply chain is largely based in the United States. Not only does that mean it should be able to get up to speed quickly after the coronavirus threat subsides, but it will also not have to make adjustments to its supply chain.
Ulta may also benefit from the inevitable increase in online shopping. The beauty category as a whole saw just 11% of its sales generated online. Ulta’s own numbers closely approximate that (around 12%-13%). However, that number is likely to go up as more consumers have no choice but to have products, such as cosmetics, delivered. I can see Ulta taking an approach like Stitch Fix (SFIX) where consumers could “try before they buy”.
About Ulta Beauty
Ulta Beauty, Inc operates as a specialty beauty retailer in the United States. The company offers branded and private label beauty products, including cosmetics, fragrance, haircare, skincare, bath and body products, professional hair products, and salon styling tools through its Ulta Beauty stores, shop-in-shops, Ulta.com website, and its mobile applications.
Read More - Current Price
- $343.26
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $420.71 (22.6% Upside)
#7 - Teladoc Health (NYSE:TDOC)
Moments in time, such as the coronavirus pandemic, can serve as tipping points for companies like Teladoc Health (NYSE:TDOC) . A behavior that is ingrained in our psyche since we were children is if you are sick, you go to the doctor. However, the level of contagion of the coronavirus is causing many thoughtful consumers to question this tried-and-true doctrine. After all, why go to the doctor, if your presence alone could infect other patients?
However, the common-sense idea of a doctor making a technology-assisted house call was not possible either due to a lack of willingness by doctors, or skepticism by patients. In that regard, the coronavirus is creating a perfect storm.
In an interview with CNBC’s Jim Cramer, Jason Gorevic, Teladoc’s CEO said, “The demand has shifted forever on virtual care, and we’re on the verge of a new era for virtual care in the healthcare system.”
But the revolution will still take time. Only a fraction of states are currently expanding their telehealth services. But one state, Washington, is taking the unique approach of allowing doctors to treat patients even if the physician is licensed in another state (they must be licensed elsewhere).
Teladoc is not yet profitable. But with momentum from patients, physicians, and it appears the federal government, this may be its moment in time. As of the close of trading on March 27, Teladoc stock was up over 90% in 2020.
About Teladoc Health
Teladoc Health, Inc provides virtual healthcare services worldwide. The company operates through Teladoc Health Integrated Care and BetterHelp segments. The Integrated Care segment offers virtual medical services, including general medical, expert medical, specialty medical, chronic condition management, and mental health, as well as enabling technologies and enterprise telehealth solutions for hospitals and health systems.
Read More - Current Price
- $9.00
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.08 (34.2% Upside)
#8 - DocuSign (NASDAQ:DOCU)
DocuSign (NASDAQ:DOCU) will stand to benefit as more companies confront a world where national and global business is done remotely. Although the company has been in business for many years, this period of social distancing is creating an opportunity. Like a lot of the companies in this presentation, DocuSign is now getting an opportunity to prove its value. And that is something the company believes will become apparent to users. Not only is the technology reliable, but in many cases, it can be installed remotely.
And the opportunity goes beyond just business to business. More and more realtors are using e-signatures with their clients. And with mortgage rates continuing to decline, the demand for homes should remain strong.
DocuSign came into the coronavirus crisis in a position of strength. The company posted a strong revenue increase of 39% for its 2020 fiscal year that ended on January 31, 2020. The company also posted positive forward guidance of a 31% revenue gain for fiscal 2021. In fact, DocuSign is on pace to log $1 billion in revenue, putting it in elite company among software-as-a-service (SaaS) companies.
About DocuSign
DocuSign, Inc provides electronic signature solution in the United States and internationally. The company provides e-signature solution that enables sending and signing of agreements on various devices; Contract Lifecycle Management (CLM), which automates workflows across the entire agreement process; Document Generation streamlines the process of generating new, custom agreements; and Gen for Salesforce, which allows sales representatives to automatically generate agreements with a few clicks from within Salesforce.
Read More - Current Price
- $78.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $63.40 (19.6% Downside)
The United States economy has proven to be not only one of the strongest in history, but also among the most adaptable. The coronavirus pandemic is putting that adaptability to the test. But as days turn into weeks, and as weeks may become a month or more of life being disrupted for many Americans, the country is starting to adapt.
But when consumers start to adapt, when things return to normal, they are never quite the same as before. Our society was already becoming more inwardly, and digitally focused prior to the outbreak of the coronavirus. You can expect that our society will become more of both. And while that presents some challenges for our nation’s psyche, the implications for businesses are becoming clear.
The businesses that thrive in a post-virus world will be the ones that can successfully navigate the changing tastes of American consumers. The challenge for investors is to identify these trends and invest in companies that are on the leading edge of these trends.
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